The European Dream (8 page)

The Pew Global Attitudes Project asked people in America, Europe, and elsewhere why some people are rich and others poor. What they found is revealing. Two-thirds of Americans believe that success is not outside of their control. Contrast that figure to Germany, where 68 percent of the people believe the exact opposite. In Europe, a majority in every country—with the exception of the U.K., the Czech Republic, and Slovakia—“believe that forces outside of an individual’s personal control determine success.”
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By more than six to one, Americans believe that people who do not succeed in life fail because of their own shortcomings, not because of society.
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Other surveys support the Pew finding. Asked why people are wealthy, 64 percent of Americans say because of personal drive, willingness to take risks, and hard work and initiative.
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Why do others fail? Sixty-four percent say because of lack of thrift, 53 percent say lack of effort, and 53 percent say lack of ability.
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The World Values Survey found that 71 percent of Americans “believe that the poor have a chance to escape from poverty,” while only 40 percent of Europeans believe that’s the case.
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Strange indeed, coming from a country that now has the largest percentage of its population in poverty of any major developed nation.

Why the vast disparity between belief and reality? Again, it comes back to the core of the American Dream . . . the tough frontier notion that if left unfettered—especially by government—each man and woman can pursue and achieve his or her dream. No wonder 58 percent of Americans say that “it is more important to have the freedom to pursue personal goals without government interference,” while only 34 percent say that “it is more important for government to guarantee that no one is in need.”
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Undoubtedly, the frontier mythology plays a significant role in understanding American attitudes about inequality and poverty. But there is also likely a more unsavory side to the issue. Racism, note a growing number of commentators, can’t entirely be dismissed from the poll results. Dig deeper, and we find that many Americans associate poverty with black America, even though in terms of raw numbers, there are more whites living under the poverty line. But in terms of percentages, a far larger proportion of the black community live below the poverty line. In 2002, the U.S. Census reported that 8 percent of whites and 24.1 percent of blacks, up from 22.7 percent in 2001, are below the poverty line.
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Nearly four hundred years after the first slaves arrived in America, the race issue still dominates the American psyche. Any visitor to the U.S. senses, very quickly, the racial tension in the air—it permeates the country. And if the truth were to be told, many white Americans think that black Americans are lazy, at best, or worst, genetically incapable of rising above their circumstances.

Some observers have suggested that one of the reasons Europeans, unlike Americans, are more willing to believe that the poor are poor through no fault of their own but rather because of societal factors is because, until recently, their poor were not racial minorities but, rather, white Caucasians, and therefore the majority was able to identify and even empathize with their plight, believing that “there but for the grace of God go I.” Race, especially in America, where the white majority has yet to fully come to grips with more than two hundred years of slavery, becomes the dividing line between “us” and “the other.” It’s easier to dismiss the disquieting number of people in poverty if they aren’t like us, if they are perceived as somehow racially, even biologically, separate. White America can’t afford to believe that the American way of life might, in some way, be to blame for the destitute conditions many black Americans find themselves in. The sad reality, however, is that a majority of African Americans come from the legions of the poor, raised on the bleak streets of inner cities, where the opportunities to rise above their dire circumstances are few. The result is that a staggering 12 percent of African American males between the ages of twenty and thirty-four are currently in prison in the United States.
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Yet most of us continue to turn away from their plight, unwilling to modify the great American belief that, in this country, opportunity abounds.

Given the vast differences in how most Americans and Europeans perceive the notion of equality of opportunity, it’s not hard to understand the two very different approaches taken to address the twin issues of income disparity and poverty. While Americans encourage private efforts to alleviate poverty and provide greater mobility, we are, for the most part, unwilling to commit our tax money to the task. If the rich are rich because they are smarter and work harder, and the poor are poor because they are lazy or without ability, then nothing the government does is going to make much of a difference. And besides, it would send the wrong message—namely, that those who worked hard and made something of their lives ought to then sacrifice some of their hard-earned income to compensate those who didn’t work hard and lacked the ability to succeed. Redistributing the wealth, say some, would compromise the very soul of the American Dream and make a mockery of the frontier covenant that is at the heart of the American success story. Many Americans believe that the marketplace is still the fairest mechanism for distributing the productive wealth of society.

Europeans, because they have had a long tradition of hereditary status and transmission—some EU countries still have kings and queens—are more used to thinking of society in class terms and are far more willing to entertain the idea of government intervening to redress inequities. On the continent—less so in the U.K.—the market is not held in such unquestioned awe as in America. There is the belief that market forces, if left to their own devices, are often unfair and, therefore, need to be tamed. Government redistribution, in the form of transfers and payments to those less fortunate, is considered an appropriate antidote to unrestrained market capitalism. That is why in Europe the notion of creating social democracies—a mixed system that balances market forces with government assistance—has flourished since World War II.

According to the OECD, while the U.S. devotes only 11 percent of its GDP to redistributing income by way of transfers and other social benefits, the EU countries contribute more than 26 percent of their GDP to social benefits.
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The U.S. is particularly stingy when it comes to helping the working poor. The legal minimum wage in the U.S. in the 1990s was only 39 percent of the average wage, whereas in the European Union it was 53 percent of the average wage.
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In the United States, unemployment benefits are also less generous than in the European Union.

Where you really see the difference between the American and European approach to addressing inequities and improving the quality of life of people is in family benefits. The U.S. is only one of three industrialized countries in the world that does not mandate maternity or paternity leave. Even worse, a majority of Americans aren’t even eligible for unpaid family leave. In Europe, paid maternity leave extends from three and a half to six months. In Sweden, mothers get sixty-four weeks off and 63 percent of their wages. In Germany, France, Austria, Denmark, the Netherlands, Norway, Portugal, and Spain, paid maternity leave is 100 percent of salary for at least three months.
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American working fathers and mothers would be shocked to hear how well parents fare across the Atlantic.

American economists and public officials are continually berating European leaders for maintaining such extensive transfer programs, arguing that high taxes to support social-benefit programs leave less money to invest in new market opportunities, undermine entrepreneurial incentive, indulge workers and their families, reward unproductive work, make European workers too expensive to hire, and inevitably make people more dependent on government and less self-reliant and resourceful. They argue that for all of its faults, the U.S. still has a more vibrant economy, its workers are more productive, and fewer people are unemployed, proof that the American economy is still the model for Europe to emulate and not the other way around. How right are they?

Productivity is the most often cited measure used by economists to explain America’s economic success and its superiority over the European Union economy. Productivity is a measure of goods and services produced per hour of labor. Between 1820 and the end of World War II, U.S. output per hour did indeed grow faster in the U.S. than in Europe and, for that matter, every other country in the world, making the U.S. economy the most powerful on the planet. Much of the reason for America’s success, in this regard, is attributed to our risk-taking attitude, entrepreneurial acumen, innovative spirit, engineering prowess, and willingness to believe in the goodness of an unhindered capitalist marketplace. Certainly, there is something to be said for all of these arguments. But there were also other advantages America enjoyed over Europe that had more to do with geography than anything else.

To begin with, the sheer expanse of the continent provided the largest single internal geographic market in the world. A common language allowed Americans to carry on commerce with relative ease. Even with new immigrants flooding to America in successive waves—especially after 1890—there was always a labor shortage, which kept wages high compared to Europe. High wages served as a prod to introduce more laborsaving technologies and reduce the cost of output per hour worked. The introduction of a transcontinental rail grid and the laying down of telegraph lines across the country sped up commercial transactions still more.

Equally important to America’s growth and productivity were the abundant natural resources that existed in North America. Millions of acres of woodland meant cheap lumber to construct homes, build factories, and create whole cities. Cheap iron ore from the Mesabi Range helped make American steel production the cheapest in the world. Large swaths of fertile and previously unexploited farmland stretching from Indiana to California made American food the cheapest anywhere. And the discovery of the largest oil reserves on Earth—in the American Southwest—transformed the U.S., making it an undisputed economic colossus by the early twentieth century. Finally, two great oceans kept America relatively isolated from the kind of warfare that periodically engulfed Europe. Our high tariffs, in turn, encouraged the development of our own internal market.

Despite all of these natural advantages, the U.S. productivity lead began to erode after World War II. Decimated by two world wars in the course of half a century, Europe was little more than a shattered shell in 1945. With the help of American financial aid, in the form of the Marshall Plan, Europe began to rebuild its broken economies.

What is so remarkable is how fast Europe caught up to the United States. In 1960, the U.S. economy was producing nearly two times more goods and services per hour than France and the United Kingdom. By 2002, however, Europe had virtually closed the productivity gap with the U.S., boosting labor productivity per hour worked to 97 percent of the U.S. level.
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European productivity growth outperformed the U.S. during virtually the entire half century following World War II. Between 1950 and 1973, European productivity grew by 4.44 percent, compared to 2.68 percent in the U.S., and from 1973 to 2000, the productivity growth in Europe increased by 2.4 percent, compared to 1.37 percent in the U.S.
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Between 1990 and 1995, twelve EU countries showed higher productivity growth than the U.S. While U.S. productivity moved slightly ahead in the last half decade of the 1990s, showing a 1.9 percent increase in growth, compared to a 1.3 percent growth rate in Europe, seven of the EU countries still grew faster. In 2002, even with the surge in U.S. productivity, six European nations achieved higher productivity.
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Americans have long believed that our workers are the most productive in the world. True, we were somewhat taken aback by reports in the early 1990s that Japan’s workers might be catching up, although the Japanese success turned out to be short-lived. But the very idea that at least some European countries might outperform American companies and American workers is unthinkable. Nonetheless, in 2002, the average worker in Norway produced $45.55 of output per hour, compared to $38.83 per hour in the United States. Belgium, Ireland, and the Netherlands also produced more output per hour than the U.S. Still, these are small countries. What about the majors, the countries that count? Well, Germany in 2002 enjoyed higher productivity per hour worked than America. The average worker produced $39.39 of output per hour. And the coup de grâce? French workers produced $41.85 of output per hour, or $3.02 more output per hour than American workers—that’s 7 percent greater productivity. France ranked third in the world in productivity per hour at the end of 2002, just behind Norway and Belgium. And five other European countries were running neck and neck with U.S. productivity—Denmark, Austria, Italy, Switzerland, and Finland. ( Japan, by the way, ranked a distant seventeenth among industrial nations in productivity.)
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Americans are so used to stereotyping the French business community as overly hierarchical and bureaucratic and French workers as somewhat dilettantish and carefree that even when confronted with the evidence, they shake their heads in disbelief. What does it say about American businesses and American workers if the French and five other European nations are actually better at conducting commerce than we are?

I should caution that American productivity has shot up since 2002—experiencing the biggest gains in more than fifty years—raising the very real question of whether European productivity advances will be able to catch up and keep pace or begin to slide in relation to America in the years ahead. Still, Europe’s productivity in many sectors continues to compare favorably to or even exceed that of the United States.
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